Post
Topic
Board Economics
Re: Bitcoin Loans and Lending; The Weakness in The Bitcoin Economy
by
patvarilly
on 13/07/2011, 02:06:19 UTC
One of the very interesting things about bitcoin is that it is a deflationary currency. Normally economists list massive deflation as a bad thing. Bitcoin embraces that with its infinite divisibility.

On a more serious note, lack of divisibility isn't (at all) the problem with a deflationary currency, so infinite divisibility is not a solution.  You hit on one of the much more serious problems.  The other big one is that deflation likely encourages hoarding at the expense of consumption, so as a businessman, you should also expect very few customers.  Here in Bitcoinland, saying such sensible things gets you labeled as an ignoramus / troll, etc. and you get pointed to threads where the issues have been "settled" (never mind that a large majority of professional economists think otherwise).

So instead of starting yet another flame war, I have a proposal.  Presumably, like most of us here, you regard Bitcoin as an interesting experiment, as opposed to the thing that you're mortgaging your future on.  Experiments need data.  So, in the spirit of openness, my proposal is:

Would you be so kind so as to regularly update us as to how much business you're doing every day?

It would help the discussion enormously to see if actual businesses are getting any significant volume or not.

Right now, it's not clear to me if Bitcoins are inflationary or deflationary: it depends on whether the rate of new coin creation does or does not exceed the rate at which new people are joining the experiment.  Certainly Bitcoins will tend to be deflationary as the rate of coin creation goes down and/or the user base explodes (assuming this happens).  So what would be most useful is to see a trend over time.  For instance, when the subsidy switches to 25 BTC instead of 50 BTC, or when a news article with wide visibility brings in a sudden spike of new users, I'd expect your business volume to go down.  But who cares what *I* expect, the data would speak for themselves.

What do you think?